Case Law Details
Brief of the Case: In the case of CIT vs Divine Infracon Pvt. Ltd , Delhi High Court reiterated its own order in case of CIT vs. Edward Keventer (Successors) Pvt. Ltd that it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963.
Facts of the Case: The Assessee filed a return for the A.Y. 2008-09 declaring a total income of Rs.3,84,027/- on 30 September, 2009. Thereafter, on 14 September, 2010 search and seizure operations were conducted at the registered office of the Assessee Company. Subsequent thereto, a notice under Section 153A of the IT Act was issued against the Assessee on 26 September, 2012. Pursuant to the notice issued under Section 153A, the AO passed an order dated 28 March, 2013 assessing the total income of the Assessee for the A.Y.2008-09 at Rs.20,28,84,027/-. The AO made an addition of Rs.20,25,00,000/- under Section 68 of the Act as the AO was of the view that the share application money received by the Assessee Company was unexplained.
The Assessee preferred an appeal against the Assessment Order before the CIT(A) inter alia challenging the addition on merits as well as on the ground that the addition was beyond the scope of Section 153A of the IT Act. The CIT(A) found merit in the Assessee’s contention that the addition made was beyond the scope of Section 153A of the Act as the addition was not based on any incriminating material found during the search. However, the CIT(A) upheld the conclusion of the AO that the share application money reflected in the books of the Assessee was unexplained.
The Revenue accepted the order passed by the CIT(A) and did not prefer any appeal before the ITAT. The Assessee, on the other hand, impugned the order of CIT(A) before the ITAT. The Revenue sought to assail the finding of the CIT(A) that the additions made were outside the scope of Section 153A of the Act. The ITAT entertained the aforesaid plea and permitted the representative of the Revenue to raise contentions in that regard, but finally the conclusions of the CIT(A) were sustained.
The present appeals have been preferred against an order passed by the ITAT being the Assessee’s appeal against the decision of the CIT (Appeals) sustaining the addition of a sum of Rs. 20,25,00,000/- on account of unexplained credit under Section 68 of the Act, on merits. The Revenue filed the appeal (ITA 771/2014) being aggrieved by the decision of the ITAT insofar as it has upheld the CIT(A)’s view that the aforesaid addition made by the AO was beyond the scope of assessment under Section 153A of the Act. The Assessee states that it has filed the appeal (ITA 185/2015) only for the reason that the Revenue has preferred an appeal against the order of the ITAT. The question of law arose for consideration was “Whether the Revenue could assail the finding returned by the CIT(A) in favour of the Assessee in an appeal preferred by the Assessee before the ITAT, limited to the issue decided by the CIT(A) against the Assessee, where Revenue did not appeal against the decision of CIT(A)”.
Contention of the Revenue: The Revenue referred to the decision of the Supreme Court in National Thermal Power Corporation Ltd. vs. Commissioner of Income Tax: 229 ITR 383 (SC) in support of the contention that it is open for the ITAT to consider all questions of law where no investigation into facts are necessary.
Contention of the Assessee: The Assessee submitted that the ITAT erred in permitting the Revenue to challenge the finding of the CIT(A) with regard to the scope of Section 153A of the Act. Further submitted that since the Revenue had not appealed against the decision of the CIT(A), it could not raise the issue before the ITAT. The Assessee referred to the decision of this Court in CIT vs. Edward Keventer (Successors) Pvt. Ltd.: (1980) 123 ITR 200(Del), in support of his contention that it would not be open for the respondent to travel outside the scope of the subject matter of the Appeal.
The Assessee further submitted that the scope of the subject matter of the Appeal was limited to the finding of the CIT(A) with regard to the merits of the addition made; the issue whether the same was beyond the scope of Section 153A of the IT Act was not the subject matter before the ITAT and, thus, the ITAT could not have entertained any plea in that regard.
The Assessee also referred to the decision of the Supreme Court in Hindustan Coca Cola Beverages P.Ltd v. Joint Commissioner of Income Tax: (2007) 293 ITR 226, wherein, it was held that the order passed by the ITAT to reopen the matter for further hearing as regards to a ground of appeal has attained its finality and therefore, the High Court could not have interfered with the final order passed by the Income-tax Appellate Tribunal.
Held by CIT (A): The CIT(A) found merit in the Assessee’s contention that the addition made was beyond the scope of Section 153A of the Act as the addition was not based on any incriminating material found during the search. However, the CIT(A) upheld the conclusion of the AO that the share application money reflected in the books of the Assessee was unexplained.
Held by ITAT: The ITAT entertained the Revenue’s plea to assail the finding of the CIT(A) that the additions made were outside the scope of Section 153A of the Act and permitted the Revenue to raise contentions in that regard, but finally the conclusions of the CIT(A) were sustained.
Held by High Court: High Court observed that the decision quoted by the Revenue is wholly inapplicable to the facts of the present case. It is trite law that the ITAT may, under Section 254(1) of the Act, pass such orders as it thinks fit; nonetheless, the decision must be in respect of the subject matter of the dispute. Indisputably, the ITAT can examine all questions which relate to the subject matter of an appeal but, once an issue has attained finality and is not a subject matter of the dispute before the ITAT, it would not be open for the ITAT to reopen the issue on the pretext of examining a question of law.
High Court observed that, the Revenue could also not take recourse to Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. By virtue of the said Rule, a respondent before the ITAT can support the decision appealed against not only on the grounds decided in favour of the respondent but also on grounds decided against it. However, Rule 27 of the said Rules would not extend to permitting the respondent to expand the scope of an appeal and assail the decision on issues, which are not subject matter of the appeal. High Court reiterated its own order in case of CIT vs. Edward Keventer (Successors) Pvt. Ltd that it would not be open to a respondent to travel outside the scope of the subject matter of the appeal under the guise of invoking Rule 27.
Tribunal can examine all questions which relate to the subject matter of an appeal but, once an issue has attained finality and is not a subject matter of the dispute before the Tribunal, it would not be open for the Tribunal to reopen the issue on the pretext of examining a question of law.
In view of the aforesaid, the Appeal preferred by the Revenue (being ITA No. 771/2014) was rejected. The Appeal preferred by the Assessee (ITA No. 185/2015) was only consequential to the Appeal filed by the Revenue and was, accordingly, also disposed of.
